Bounced Checks

by Kathy
(Texas)

Hi Jennifer, I'm trying to to record a bounced check from a customer, and again, finding out there are many suggestions and have little confidence in these and Intuit when others are saying Intuit is wrong. I followed a Pro-Advisor's advise.

Here are the directions I followed, but there seems to a step missing as the outstanding invoice still appears on my Aging Report and the money isn't redeposited into the checking account. I had difficulty following his instructions, but everything looked good until my money didn't show up in checking when the check was redeposited. Here we go... this is long.

Link RETURNED CHECK item directly to the Sales Income Account instead of the Ck. Acct.

Link RETURNED CHECK FEE item to the Bank Service Charges

When the NSF first bounces, go to Write Checks and create a Debit (in the check number area) non-printed check with a Payee of Returned Check (OTHER NAME) and fill in the amount of the check. Use the customer's name in the memo area.

Charge this non-check to the SALES INCOME ACCOUNT in the Expense Column below.

You will also want to create another one with a Payee of RETURNED CHECK FEE for the amount that the bank charged you for the bounced check. This way, there will be checks for you to check off when you reconcile. It will also reduce your income for the amount of that bounced check.

Then, create a new invoice for the Customer using the Returned Check Item and the Returned Check Fee Item that are linked as we discussed above, to the Income Accounts instead of the checking account.

When the customer pays you and you Receive Payments for this invoice, it will put the amount back into your income again.

THE PROBLEM IS that the money isn't deposited back into the my checking account.

The author goes on to say: The reasoning for my method is because the invoice linked to the Checking Account directly on the Cash Basis Balance Sheet will create an A/R balance on the Cash Basis Balance Sheet, which is not correct.

Also says... the two items for Returned Check and Returned Check Fee should be Other Charge type and non-tax. That way, your Sales Tax calculation is not affected. NSF checks are not subject to sales tax and you don't get any Sales Tax credit when the customer's check is returned. That's why I said to do the Returned Check item for the total amount of the customer's bounced check.

This is really confusing.

If you can help, I would be VERY grateful - - again!

Thanks. Kathy


Reply:

His steps make sense to me. I think the "missing" step is that you are not re-recording the customer's check once it gets redeposited. You wrote:

"When the customer pays you and you Receive Payments for this invoice, it will put the amount back into your income again."

It's not that it puts it back into income. It lowers the balance on the invoice and puts the money either into your bank account or into Undeposited funds, depending on your preference. My suggestion is to go back to this step and make 100% certain you are doing it correctly. If the money is not in your bank account or in Undeposited Funds, where is it? It has to be somewhere.

I hope this answers your question about bounced checks. Let me know by posting a comment below.

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